BitClout Founder Nader Al-Naji Charged by SEC for Fraud and Securities Violations

BitClout's founder, Nader Al-Naji, is facing legal trouble. The SEC has charged Al-Naji with fraud and unregistered offering of securities, alleging he used the pseudonym “DiamondHands” to raise over $257 million in cryptocurrency while evading regulatory scrutiny.

BitClout, a decentralized social media platform, attracted investments from top firms like a16z, Sequoia, and Coinbase Ventures, raising around $7 million in its seed round. However, the SEC claims Al-Naji misled investors by promising that the platform’s token, BTCLT, would not fund personal expenses, while he allegedly spent over $7 million on luxuries, including a Beverly Hills mansion.

BitClout has been controversial since its 2021 launch, criticized for scraping 15,000 profiles from Twitter and creating a token-based stock market for celebrities without their consent. Legal challenges followed, including a cease-and-desist letter from Brandon Curtis and a public objection from former Singapore Prime Minister Lee Hsien Loong.

Al-Naji’s previous venture, Basis, had earned him goodwill in the crypto community despite its shutdown due to regulatory concerns, as investors recovered most of their funds. This reputation helped him secure funding for BitClout. Initially, BitClout was pitched as a decentralized social media platform, but a leaked feature testing a social stock market diverted focus and caused investor unrest.

Despite the backlash, some investors and tech figures defended BitClout, praising its innovative approach. However, Al-Naji’s concealed identity and the SEC's allegations of profiting millions from the venture have intensified the controversy. While Al-Naji has not commented on the recent charges, he previously expressed confidence in his legal compliance, reflecting on lessons learned from his earlier venture.